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Hyundai, Kia’s U.S. Car Factories Run Overtime as Toyota Pares Production

Hyundai Motor Co. (005380) and Kia Motors Corp. (000270), South Korea’s biggest carmakers, are running full shifts at their U.S. plants with overtime, unscathed by parts shortages that are curbing local output for Japan-based competitors.

Hyundai’s plant in Montgomery, Alabama, aims to squeeze out 10 percent more Sonata and Elantra sedans this year than its 300,000-unit capacity, said Robert Burns, a spokesman for the factory. About 80 miles east, Kia’s plant in West Point, Georgia, has run extended weekday shifts and Saturday work since last year and expects that to continue for the foreseeable future, said Corinne Hodges, a spokeswoman for Kia.

“We’ve been fortunate,” Burns said. “Our parts development team is closely monitoring all our suppliers, but at this point there’s been no disruption.”

Expanded U.S. output at Seoul-based Hyundai and affiliate Kia contrasts with assembly reductions at the North American plants of Toyota Motor Corp. (7203), Honda Motor Co. and Nissan Motor Co., implemented after Japan’s record earthquake on March 11. U.S.-based General Motors Co. (GM) and Ford Motor Co. (F) also cut some assembly and Chrysler Group LLC canceled overtime shifts to conserve supplies of parts that may grow scarcer.

Photographer: Mark Elias/Bloomberg

Completed 2011 Hyundai Sonata sedans undergo final inspection in the general assembly building at the Hyundai Motor Manufacturing Alabama (HMMA) plant in Montgomery, Alabama, U.S. Close

Completed 2011 Hyundai Sonata sedans undergo final inspection in the general assembly... Read More

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Photographer: Mark Elias/Bloomberg

Completed 2011 Hyundai Sonata sedans undergo final inspection in the general assembly building at the Hyundai Motor Manufacturing Alabama (HMMA) plant in Montgomery, Alabama, U.S.

Globally, some 1.5 million units of auto production may be temporarily lost because of damaged operations at Japan-based parts and materials suppliers, said Michael Robinet, vice president of Lexington, Massachusetts-based IHS Automotive. The full extent of the disruption isn’t clear yet, he said.

Lower Exposure

Hyundai fell 0.2 percent to 221,500 won at 3:29 p.m. in Korea Stock Exchange trading in Seoul. Kia gained 0.4 percent to 75,600 won.

“The Koreans’ exposure to Japanese suppliers is obviously much lower, but it’s too early to say they won’t feel some impact,” Robinet said. “The industry is still working off inventory of parts made before the earthquake. We haven’t seen the full impact.”

Toyota this week told U.S. dealers reduced output in Japan and North America may thin supplies of cars and trucks into the third quarter. The company, the world’s largest automaker, has canceled five days of work at plants in North America this month and expects to lose 35,000 units of production as a result.

Honda began curbing daily output at U.S. and Canadian factories by 2,000 vehicles on March 30, said Ron Lietzke, a spokesman for the Tokyo-based company.

Sonata, Elantra

Nissan canceled six days of production at its plants in Tennessee and Mississippi, and for five days at each of its two auto-assembly factories in Mexico.

The Sonata, Hyundai’s top-selling U.S. model, had a 63 percent increase in deliveries this year through March, while Elantra sales grew 73 percent. Kia sold 9.3 percent more of its Georgia-built Sorento sport-utility vehicle in 2011’s first quarter.

Hyundai opened its Alabama plant in 2004 and employs about 2,500 workers at the site. Kia’s factory opened in late 2009 and boosted output after adding production of Hyundai’s Santa Fe SUV to the Sorento in 2010. The plant has about 2,400 workers and plans to add 600 by the end of this year, Hodges said.

“To the extent others have to pull back on production, if Hyundai and Kia still have inventory, they’ll be able to take advantage of the situation,” Robinet said. “That may be short- lived, as competitors really start ramping production up later in the year.”

Hyundai’s U.S. sales unit is based in Fountain Valley, California. Kia’s U.S. sales unit is in Irvine, California.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net

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